What tariffs would countries impose if they did not have to fear any retaliation? What would occur if there was a complete breakdown of trade policy cooperation? What would be the outcome if countries engaged in fully efficient trade negotiations? And what would happen to trade policy...

We analyse a simple ‘tariffs-cum-foreign competition’ policy targeted at enhancing the competitive position of a domestic, developing country firm that competes with its developed country counterpart on the domestic market and that carries out innovative (imitative) effort. We evaluate this...